Backlash Against $7.2B Swipe Fee Settlement Gains Momentum

The $7.2 billion settlement in the Visa/MasterCard swipe fee class action suit is far from settled. In fact, 10 of the 19 named plaintiffs in the suit, supposedly settled in July, now oppose the offer – despite the fact that the proposed $7.2 billion would, if approved, be the largest federal antitrust settlement in U.S. history.

The 19 class plaintiffs represented some seven million retailers in the case, which was originally filed in 2005. If approved, the settlement would apply to the nearly eight million merchants that accept Visa and MasterCard for payments.

This latest development in the escalating war of words could well send the case back into the courts. The proposed settlement is due to be submitted for preliminary approval to the U.S. District Court for the Eastern District of New York on October 19, but settlement opponents say they will file a brief in opposition 30 days after the proposal is filed.

Settlement or Surrender?

"Negotiators have greatly underestimated the outrage among retailers over this flawed settlement," said Retail Industry Leaders Association (RILA) president Sandy Kennedy in an October 12 statement. "Retailers overwhelmingly view this proposal not as a settlement, but as surrender.

"The proposed class action settlement not only preserves the broken debit and credit markets, but it also denies retailers their future legal rights and effectively forces merchants to fund the settlement through unrestrained interchange fees in perpetuity," Kennedy added. "The proposal is unacceptable in every way and we look forward to making our case to the courts."

Objections to the proposed offer, which consists of a $6 billion payment and an eight-month swipe fee reduction valued at $1.2 billion, began almost immediately after it was announced this summer. First Target and then Walmart expressed their opposition, and they were joined by a growing number of retail and hospitality industry associations. Last month, the National Retail Federation's Board of Directors authorized the association to go to court in an attempt to block the settlement, despite the fact that NRF is not a party to the lawsuit.

The settlement does have the support of some big-name retailers, including Kroger and Safeway, which have said it would let them communicate with customers directly for the first time about swipe fees, according to a Reuters report.

The rhetoric really began to heat up last month. A September 20 letter sent to the leaders of the U.S. Senate and House of Representatives by the dissatisfied retailers said the settlement enables "continued centralized price-fixing by Visa and MasterCard" and "limits emerging innovations that can bring meaningful competition to the marketplace, such as mobile payments." It "allows Visa and MasterCard to continue to handcuff merchants and prevent them from seeking better deals and communicating openly with their customers."

American Bankers Association president and CEO Frank Keating fired back with his own September 20 letter to Congressional leaders, accusing the retail industry of "bombarding Congress with manufactured claims of unfairness over how the U.S. payments system operates, part of an effort to drag lawmakers back into the controversial debate over interchange fees."

The 10 named plaintiffs that are now giving the settlement a thumbs-down include Affiliated Foods Midwest, Coborn's, Inc., D'Agostino Supermarkets, Jetro Holdings, Inc. and Jetro Cash & Carry Enterprise, the National Association of Convenience Stores, NATSO, National Community Pharmacists Association, National Cooperative Grocers Association, National Grocers Association and the National Restaurant Association.

For related content: War of Words Over $7.2B Swipe Fee Settlement Heats Up

Walmart, Target Oppose $7.2B Swipe Fee Settlement Offer

Retailers Win Major $6B Victory Against Visa, MasterCard Swipe Fees

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